The $459 Monthly Loss: What a 22% Social Security Cut Would Cost the Average Retiree
Quick Read
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A projected 22% Social Security cut by 2032 would slash the average retiree’s monthly benefit by $459, from $2,088 to roughly $1,629.
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About 44% of retirement-age Americans rely solely on Social Security, yet average senior monthly spending already exceeds benefits by over $3,000.
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Congress can raise taxes or increase the full retirement age to prevent cuts, but both options carry serious economic or personal drawbacks.
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If someone at your place of work were to turn to you and say, “We’re going to be cutting your pay by $459 a month due to financial difficulties,” what would your reaction be? Would you be outraged? Upset? Scared?
This is the reality Social Security recipients face today.
The average retiree on Social Security collects about $2,088 a month. Meanwhile, the Social Security Trustees report that the program may face a sweeping 22% benefit cut as early as 2032 due to a pending financial shortfall.
If a 22% benefit cut is implemented, the average Social Security recipient could see their monthly income reduced by $459. And that’s a loss many retirees simply can’t afford.
A 22% Social Security cut could be catastrophic
The nonpartisan Senior Citizens League estimates that 24.6 million older Americans today pay their bills on Social Security alone. That’s roughly 44% of the retirement-age population. That makes Social Security cuts a broad problem lawmakers have to solve.
As mentioned above, the average monthly Social Security check is $2,088. But the Bureau of Labor Statistics puts average monthly spending among Americans age 65 and over at $5,119.
As it is, seniors who rely solely on Social Security for income can’t afford an average lifestyle. Losing $459 per month would no doubt plunge millions of retirees into poverty.
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What Congress can do to prevent benefit cuts
The good news in all of this is that Congress has options to prevent Social Security cuts. The bad news is that each potential solution creates another issue.
One option is to implement a broad tax hike to pump more revenue directly into Social Security. But the drawback here is clear. Raising taxes burdens working Americans, as well as the companies that employ them.
Now Congress could instead opt to raise taxes only on the wealthy. But since employers share in that obligation, once again, the cost of maintaining a payroll would go up. That could lead to widespread layoffs and reduced corporate spending, which could negatively affect the U.S. economy as a whole.
Instead of raising taxes to prevent Social Security cuts, Congress could instead increase the program’s full retirement age (FRA), which is currently 67 for anyone born in 1960 or later. FRA is when seniors are able to collect their monthly benefits without a reduction.
Raising FRA, however, puts the burden on working Americans to remain employed longer or otherwise face a self-imposed benefit cut. And if physical laborers are unable to work a few extra years due to health-related limitations, they effectively lose out on Social Security through no fault of their own.
The point, therefore, is that while lawmakers can potentially stave off Social Security cuts, doing so is complicated and may not be fully possible. That’s why it’s important for working Americans today to save as much as possible.
If you’re able to build a nice amount of savings, you may end up in a position where a $459 monthly Social Security cut doesn’t hurt your retirement plans all that much.
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